Chiefs at IRS Knew of Targeting

Obama, Lawmakers Pledge Action on Tea-Party Scrutiny

During a news conference with British Prime Minister David Cameron, President Barack Obama responds to a question about the alleged IRS political targeting, saying if these allegations are true it is 'outrageous'.

By

John D. McKinnon

Updated May 13, 2013 10:37 p.m. ET

President Barack Obama said Monday those responsible for any improper scrutiny of conservative groups' tax status would be held "fully accountable," hours before it emerged that the current and former heads of the Internal Revenue Service were informed last May that tea-party groups had been targeted.

The IRS said in a statement that acting Commissioner Steven Miller was first told by the agency staff on May 3, 2012, that some specific groups' applications for tax-exempt status were improperly selected for extra scrutiny based on their names.

But two top GOP lawmakers said Mr. Miller, who was named to the top IRS post in November, didn't disclose the problems in subsequent letters sent to them—even as they and other congressional Republicans had raised questions about IRS scrutiny of tea-party groups' applications for tax-exempt status. Mr. Miller couldn't be reached for comment on Monday.

Separately, investigators told congressional staffers Monday that Mr. Miller's predecessor, Commissioner Douglas Shulman, who was appointed by President George W. Bush in 2008, was informed of the problems in May 2012, according to an aide. But Republicans say Mr. Shulman—who had previously testified that there was no IRS targeting—never told them of what he subsequently learned. Mr. Shulman couldn't be reached for comment Monday.

Mr. Obama, in his first public comments on the controversy, echoed the anger expressed by Republican and Democratic lawmakers. "If in fact IRS personnel engaged in the kind of practices that have been reported on, and were intentionally targeting conservative groups, then that's outrageous," he said during a news conference with U.K. Prime Minister David Cameron.

The president, who said he first learned about the alleged abuses Friday, added that he wanted to reserve judgment on the matter until after release of an investigation by the Treasury Inspector General for Tax Administration.

The IRS controversy, combined with a continuing GOP focus on the administration's conduct before and after the death of a U.S. ambassador in Benghazi, Libya, and the increasingly bloody Syrian civil war are among a litany of issues threatening to disrupt the administration's second-term agenda. Already, Congress has rejected Mr. Obama's preferred gun-control legislation. On deck is a complex immigration-law overhaul.

On Friday, Lois Lerner, head of the IRS tax-exempt-organizations division, apologized for "inappropriate" actions by workers in subjecting applications of some conservative groups that had "tea party" or "patriot" in their names, among other criteria.

"I wrote to the IRS three times last year after hearing concerns that conservative groups were being targeted," Sen. Orrin Hatch (R., Utah), the ranking Republican on the Senate Finance Committee said Monday. "Yet it didn't occur to anyone at the IRS to let us know that this targeting was in fact happening? Knowing what we know now, the IRS was at best being far from forthcoming, or at worst, being deliberately dishonest with Congress. These are the facts and the questions we need answered."

In a letter sent in September to Mr. Hatch and posted on the committee's website, Mr. Miller said, "Revenue agents use sound reasoning based on tax law training and their experience to review applications and identify the additional information needed to make a proper determination of an organization's exempt status."

Mr. Miller also sent a letter to Rep. Charles Boustany (R., La.) in June that said IRS officials saw an increase in applications from groups that were "potentially engaged in political advocacy" and took steps to "coordinate the handling of the cases." The letter mentioned delays in processing, but not targeting.

Groups granted tax-exempt status under section 501(c)(4) of the tax code are allowed to engage in some political activity, but their primary focus is supposed to be promoting social welfare.

Details of the investigation that emerged over the weekend showed that by June 2011 IRS workers had identified applications from more than 100 groups that would be targeted based on concerns the groups had about government spending, debt or taxes; or if they planned to lobby to "make America a better place to live"; or if they criticized how the country was being run.

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The findings, which were reviewed by The Wall Street Journal, showed that after Ms. Lerner was briefed on these proposed guidelines, she ordered that such criteria be immediately revised. But investigators found that the IRS unit continued to press ahead with other politically sensitive requests, including asking applicants for donor information.

It still isn't clear how the scrutiny of conservative groups got started. A timeline prepared by investigators for the inspector general's office suggests that it began in 2010. But the first entry in the timeline is redacted.

The House Ways and Means Committee will hold a hearing Friday to look into the IRS allegations.

Rep. Dave Camp (R., Mich.), chairman of the committee, and Rep. Sander Levin (D., Mich.), the ranking Democrat, said the only witnesses would be Mr. Miller and the Treasury inspector general for tax administration, J. Russell George.

"The American public expects the Internal Revenue Service to be apolitical in its enforcement of our tax laws," Mr. Camp said. "News that the agency admits it targeted American taxpayers based on politics is both astounding and appalling."

The investigation into the IRS's targeting of conservative groups has revealed that high-ranking IRS officials knew as early as 2011 of the practice. John McKinnon reports.

Late Monday, Republicans on the Ways and Means and Finance committees released their own timelines of their interactions with the IRS, detailing how they say they were stymied in their efforts to find out what had happened to conservative groups.

Treasury inspector general reports often include recommendations for policy changes or further review. If this report includes recommendations, the Obama administration could decide to act on them, ignore them or launch its own review.

IRS officials have maintained that the problem was localized among lower-level employees in the Cincinnati office, which oversees approvals of many tax-exempt organizations. They also have characterized the problem as a bureaucratic snafu that resulted from taking shortcuts. The agency said in a statement Friday that the special treatment didn't stem from "any political or partisan rationale."

But Cleta Mitchell, a lawyer representing a number of the conservative groups, said several of her clients received IRS letters early in 2012 that came from Washington, not Cincinnati. Two were reviewed by The Wall Street Journal. Both asked for additional information.

ENLARGE

President Obama responds to a question Monday during a news conference with Britain's Prime Minister David Cameron in the East Room at the White House.
Reuters

One asked 13 questions, including identities of all contributors of more than $2,000 for 2009-2011. It also asked for "copies of emails you distributed and indicate the key issue, date and target audience for each." Another asked about the group's planned lectures, classes and workshops; websites; rallies and exhibitions; lobbying; and voter education and registration efforts.

The IRS didn't respond to a request for comment.

Ms. Mitchell and another lawyer representing tea-party groups, Jay Sekulow of the conservative American Center for Law and Justice, both said they sent letters demanding that groups they represent be approved for tax-exempt status. "If that does not occur by Friday, we will advise our clients of their right to sue the IRS for the redress of their grievances," Mr. Sekulow said in a statement.

Republicans also are upset that Ms. Lerner learned of the activities in June of 2011, according to the investigative review, yet made no mention of them in lengthy correspondence with lawmakers during 2012.

Republicans also questioned why Mr. Obama said he only learned of the IRS conduct last Friday. Press secretary Jay Carney told reporters the White House Counsel's Office was told during the week of April 22 that the inspector general for tax administration was wrapping up an investigation of the issue.

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